Whether hiring of buses to State Road Transportation Company is covered under rent a cab service?

PJ/Case Laws/2012-13/1320

Case:-S K KAREEMUN Versus CCE, HYDERABAD-III

Citation:- 2012-TIOL-1472-CESTAT-BANG

Brief Facts:- The Department has raised demand of service tax and interest on the appellant under Rent a Cab services due to the fact that the appellant had made available their buses to the Andhra Pradesh State Road Transport Corporation(APSRTC) under agreements where-under the APSRTC would ply these buses on the pre-determined routes by stage carriage permits held by the bus owners, with a time schedule fixed by the APSRTC, and the bus would provide the services of drivers to the Corporation and would be paid by the Corporation hire charges per km. The conductors employed by the Corporation would collect passenger fares as fixed by the Corporation/State Government. The buses were to be maintained in roadworthy condition by the owners/appellants. The insurance should be taken by the appellant but showing the Corporation as the hirer in the insurance certificates and the Corporation would accordingly pay the premium. The impugned demands are on the gross amounts of hire charges paid to the appellants by the Corporation during the respective periods of dispute and demands are under the head 'rent-a-cab service.

Appellant Contentions:- The learned counsel has drawn attention towards the definition of 'tour operator' under section 65(115) of the Finance Act, 1994 and has argued that, once a motor vehicle is covered by a stage carriage permit, it stands outside the levy of service tax. They have also extensively referred to the relevant terms and conditions of the agreement.

Respondent Contentions:- The Respondent draws attention towards the definition of “cab” under section 65(20) and “rent a cab scheme operator” under section 65(91) and submits that, on terms and conditions of the agreement and the facts of the case, the vehicles in question would squarely fit in the definition of "cab" and the operations with such vehicles would get covered under the definition of "rent-a-cab service”. There is no reference to 'stage carriage permit' in any of the agreements though it is not in dispute that all the buses were covered by stage carriage permits. As per the agreements, the buses were to be covered by 'contract carriage permits'. The buses were under the possession and control of the appellants and were operated by the appellants, these vehicles cannot be recognized as "stage carriages" as defined under the Motor Vehicles Act/Rules and, therefore, the appellants cannot validly contest the demands raised under head "rent-a-cab" service and also relied on the decision in the case of Lok Priya Travels vs. CST, Ahmedabad.

Reasoning of Judgment:- We have considered submissions on both sides and we are of the view that the exact nature of the activity undertaken by the appellant has to be examined in detail at final hearing stage. For the purpose of stay application, we have studied the terms and conditions of a specimen agreement. The terms and conditions of the agreements were as follows:
a)    Bus is owned by the appellant and operated as a stage carriage for the corporation.
b)    Bus was to be operated on the said route with the same time schedule fixed by the corporation.
c)    Bus was kept to be it roadworthy condition in terms of the Motor Vehicles Act/Rules by the owner.
d)    It had to be insured to cover all risks and the corporation to be shown as the hirer of the vehicle in the insurance policy.
e)    It was the owner responsibility of the owner to make arrangements for proper prosecution of proceedings either before the Motor Accidents claims Tribunal or other authorities.
f)     Owner was required to comply with all statutory provisions pertaining to labour, insurance.
g)    Owner was required to provide a driver with a valid driving license for operating the vehicle and was also required to pay his wages.
h)    Passenger fares were liable to be collected at the prescribed rates by a conductor employed by the Corporation.
i)      Owner was required to display the Corporation’s advertisement boards/banners on the bus or in its interior and all the revenues arising out of all such advertisement would go to the corporation..
j)     Owner should maintain a log book in the proforma prescribed by the corporation to enter the operational particulars.
k)    Owner or his family members shall not engage themselves in the business of operating other vehicles for contact carriage.

From above terms, it is clear that the buses did not fit in the definition of "cab" and the transactions between the Corporation on the one hand and the appellant on the other are not to be covered as squarely falling within the ambit of "rent-a-cab" service. Certain factors emerging from the nature of transactions appear to be incompatible with the features of rent a cab scheme. The buses were admittedly being operated as stage carriage under the cover of stage carriage permits. The routes were allotted by the RTOs as per State Government's policy, with fixed time table determined by the Corporation, fares rates fixed by the State Government and collected by the Corporation. All these facts appear to converge to features of a public transport system. Finally we find that the activities undertaken by the appellants were much more than mere hiring of buses to the Corporation and hence might not be covered by the definition of "rent-a-cab" service. The case law cited by the Respondent has also been examined and the same does not support the present case in as much as the activity discussed in that case was one of hiring of buses owned by the appellants by a municipal corporation for commuting its employees on all working days of the Corporation and not for public transport. We are inclined to grant waiver of pre-deposit and stay of recovery in respect of the adjudged dues.

Decision: - Pre-deposit waived and recovery stayed.

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PJ/Case Laws/2012-13/1320

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